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Senator, thank you very much...
Senator GURNEY. Thank you, Mr. Chairman. .:i
Mr. THOMPSON. It has been nice to see you again.

Senator GURNEY. Knowing some of the members of this committee
personally, I think you will probably come to grips with the problem.
Thank you.
* Mr. THOMPSON. The subcommittee will adjourn, to meet tomorrow
at 2 p.m.''

(Whereupon, at 12 noon the subcommittee adjourned, to reconvene at 2 p.m. Wednesday, October 13, 1971.)

IT

TO AMEND THE SERVICE CONTRACT ACT OF 1965 :

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HOUSE, SUBCO EDUCATI W as

HOUSE OF REPRESENTATIVES,

SPECIAL SUBCOMMITTEE ON LABOR
OF THE COMMITTEE ON EDUCATION AND LABOR,

. ... Washington, D.C. The subcommittee met at 3:20 p.m., pursuant to recess, in room 2261, Rayburn House Office Building, Hon Frank Thompson, Jr. (chairman of the subcommittee) presiding.

Present: Representative Thompson.

Staff members present: Hugh G. Duffy, majority counsel; Jeunesse M. Beaumont, clerk; Michael Bernstein, minority counsel for labor; and John C. Miller, associate minority counsel for labor.

Mr. THOMPSON. The subcommittee will be in order. Our first witness is our distinguished colleague, Lou Frey, Jr., a Representative from the State of Florida. .

STATEMENT OF HON. LOUIS FREY, JR., A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF FLORIDA

Mr. FREY. Thank you, Mr. Chairman. ' I would like to submit my statement for the record. Mr. THOMPSON. Without objection, it will be included in full at this point.

(Statement follows:)

STATEMENT OF CONGRESSMAN LOUIS FREY, JR., A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF FLORIDA

Mr. Chairman, I am pleased to be given the opportunity to appear before your Subcommittee today in order to protest the decision of the Department of Labor on September 9th not to issue a wage-rate determination under the Service Contract Act to guide bidders for the operation and management contract at the Air Force Eastern Test Range at Cape Kennedy, Florida. Your prompt response to my request of September 14th to hold hearings on this matter is most gratifying not only to me, but to my constituents in central Florida. Hopefully, during these three days of public hearings facts can be brought to your attention which suggest that the Department's decision not only will have have serious economic repercussions, but that it also violates the spirit and intent of the Service Contract Act.

Let me say initially Mr. Chairman, that I was shocked when I was notified of the Department's decision. I requested that a wage survey team be sent to the Cape to see first-hand what the wage situation was. My subsequent discussions with the officials who visited the Cape as well as the Secretary himself convinced me that a wage floor would be established. They seemed well aware of and concerned about the experience of the Kennedy Space Center which resulted from their failure to make a wage-rate determination.

The rationale used by the Department in reaching its decision was that the wages paid service workers at Cape Kennedy are inflationary and that to establish a wage rate base “at this time might be prejudicial to the public interest in the success of the President's economic program to combat inflation.”

Let us carefully examine their reasoning. Even if you assume that the area's pay scales are inflated, it still doesn't eliminate the need for standards to guide the bidding contractors and protect employees from extreme cuts in wages. Since there is no hardware, the only variable that can be reduced and will be reduced by bidders to obtain the contract is wages.

If the pay scale is inflationary, then the Department could establish a base which would be, in their opinion, more in line with those paid to workers elsewhere in the general community and would, at the same time, protect the affected wage-earners from having their wages drastically reduced. Reduction of wages would be almost a certainty as the experience has been that the "winning bid” when there is a wage-rate base is usually right at the base level.

The statement by the Secretary, therefore, that to make a wage determination would be "prejudicial” to the President's program to combat inflation can mean only one thing: by allowing the present workers under this contract to suffer substantial paycuts, the overall economy will be strengthened. Mr. Chairman, I strongly support the President's anti-inflation policies, but I cannot believe that the action taken in the situation before us is a part of that program. If it is, there are very few of us, if any, in this Congress who would support it.

Moreover, the Air Force is naive in concluding that wideopen competition will produce any cost savings. Any reduction in costs are not due to true efficiencies in operation, but to a ruthless depression of the wages of low-income workers. In addition, the closeout and startup costs involved, the labor-management strife created, and the demoralization of employees leading to the inevitable deterioration in the quality of work to be performed will result in costing the taxpayers more in the long run.

Let's retrace our steps at this point. Is the assumption that the wages paid under the present contract are inflationary valid ? In my opinion, it is not or, at least, is open to serious challenge.

The average annual increase in wages paid to members of the International Brotherhood of Electrical Workers under this contract has only been 3.01% per year. Moreover, while in 1963 the wage rates paid to these employees were higher than those paid to comparable employees of Bell Telephone and under civil service in Brevard County, they are now well below them-ranging from $6 to $35 a week less.

Furthermore, Pan Am employees at the Test Range who belong to the Transport Workers Union did not receive the liberal pay increase which other Pan Am employees around the country received. They decided not to negotiate because of the wage cuts that took place at the KSC. Moreover, members of Local 525 of the Transport Workers Union together with the United Plant Guard workers and the Teamsters were the first unions to sign a pledge in the interest of national defense not to strike the facilities.

At this point, I think it would be instructive to reexamine what effect the failure to set a wage-rate base in the support services contract at the Kennedy Space Center had. According to Boeing's own records, at least 400 of the 1100 employees of the predecessor contractor, TWA, were displaced. Pay reductions for those who were hired, again according to Boeing, ranged up to 35% and averaged approximately 17%.

These figures are, I am sure, however, on the conservative side. The International Association of Machinist and Aerospace workers informs me that in the High Voltage section alone at the KSC there has been a 47% turnover of personnel. The quality of personnel hired has from all reports also deteriorated. A new employee in the High Voltage section was not even familiar with what a substation is, and it includes a primary switch of 13,800 volts.

The effect which this sad episode has had coming at a time when there was already substantial economic dislocation was well-documented in the hearings held by this Subcommittee in May of this year. The entire space effort has been jeopardized by the effect which the wage cuts and layoffs have had on employee morale as well as the quality of those employed. Serious personal hardships, such as the loss of pension rights, mortgage foreclosures, etc. have also resulted.

We cannot allow a report of what happened at the KSC at the Eastern Test Range. Brevard County and East Central Florida have suffered enough from the whims of the Federal Government. If we are going to "change priorities” and forsake the lofty goals and accomplishments of the space program, let us, at least, insure that the retreat or change is an orderly one.

There are, it seems to me, two alternatives. One, we can wait for the Supreme Court to decide in the case of Burns v. NLRB that the "successor employer doctrine" is valid and applies to government contracts; or two, this Subcommittee can clarify the language in the Service Contract Act to make certain that in contracts such as the support contract at the Eastern Test Range, the Labor Department must make a wage determination.

With regard to the first alternative, I have written the Solicitor General, Erwin N. Griswold, regarding the merits of the Burns case and urged that he make a motion for expedited consideration of the case so that if it upholds the "successor employer doctrine" in government contracts, bidders for the Test Range contract will be required to pay the same existing wages as the predecessor contractor. Mr. Griswold's reply to me stated that “it is likely that the Court will act on the case early in the term" and "if the Court acts on the case, the government will make every effort to insure that the case is heard as soon as possible." Both of these letters are submitted for record.

I do feel, however, that this Subcommittee should make every effort, despite what happens in the Burns case, to tighten the language of the Service Contract Act so that its spirit and intent will not be violated both in the situation we are discussing here as well as in the future. The purposes of the Act—to protect service contract employees, permit them to obtain some job security and attain decent living standards for themselves and their families—will be subverted once again unless corrective action is initiated.

Thank you, Mr. Chairman.

Mr. FREY. I would like to compliment the subcommittee on having hearings. I am familiar with the hearings you have had previously on this, and I have read them.

In the few moments I have, I would like to address the chairman on this issue on a very personal basis.

I have lived in this area, and have, of course, seen it first in practicing law and then as a Member of Congress, and as I read the testimony, my own testimony and that of the other witnesses, and the statistics in it appear very cold.

Many of the men we are talking about have over 13 years of experience. Many of them are over 50 years of age. Their average is about 46, and yet nowhere, really, appears the dedication of all the men in this area, many of whom aren't there any more..

It is difficult to convey to you the disruption of human life that has taken place. When I go door to door, I oftentimes find foreclosure signs on them, and discover that so many of these men who have dedicated their lives to this space program really have nowhere left to go.

It is something that I think the previous administration and this administration haven't addressed themselves sufficiently to, the individuals and families who are affected by changes in Government policies.

I think to understand completely the problem we face at the Cape, you must have this background, this understanding of what has gone on and where we are..

I guess what I am trying to say, is that if it were a question of equity, certainly the equity would be on the side of the men.

But I don't think it is a question of equity that we are involved in here. I think we can stay on the law side of the issue.

In the situation before us, a number of us in the Florida delegation have been working with the Secretary of Labor to get a team of investigators to come down to see if we could get a wage determination, and I received, as the other members did, a letter back from the Secretary of Labor stating that in terms of the public interest that a determination wasn't necessary. · He also mentioned that he felt it might be prejudicial to the program to combat inflation. ." He further mentioned that the service workers were historically paid higher wages. I would like to submit this for the record, if I might. (The letter referred to follows :) ;

U.S. DEPARTMENT OF LABOR,

- Washington, D.O., September 9, 1971. Hon. LOU FREY Jr., U.S. House of Representatives, Washington, D.C.

DEAR CONGRESSMAN FREY: This is in response to your letter of July 20, 1971, concerning the Air Force contract for operations and management of the Eastern Test Range at Cape Kennedy, Florida. After considerable deliberation, I have decided that, under current conditions, continuation of the limitations previously adopted by the Department of Labor on the issuance of wage determinations under the Service Contract Act for work at Cape Kennedy 'is necessary and proper in the public interest.

This Department has not applied the wage determination provisions of the Service Contract Act to work at Cape Kennedy except in the case of janitors and porters. This limitation continues to be a reasonable administrative practice in view of the history and present character of pay rates and fringe benefits of the employees engaged in work for contractors in the locality. The conditions which led to the adoption of the limitation in 1967 under the authority of Section 4(b) of the Act are equally persuasive now and are reinforced by the fact that a change at this time might be prejudicial to the public interest in the success of the President's economic program to combat inflation.

The Department of Labor decided in 1967 that the pattern of wages in Brevard County was such that the limited resources available for making wage determinations could more appropriately be utilized in other localities. I have concluded that the policy is still reasonable and proper..

Wage "rates paid service workers at Cape Kennedy have been and continue to be equal to or greater than those paid other workers elsewhere in the general community. This has been the case because the wage rates paid the service workers in the aerospace complex historically have been bargained collectively and many rates were “imported” to Brevard County from other higher-wage localities where the Government contractors were operating.

Consideration of the current wage patterns in Brevard County has convinced me that service contracts for technical and aerospace support do not at this time require the insertion of additional'wage determinations to assure that the wages paid service employees will not be less than those prevailing in the locality or in the general community in which Cape Kennedy and Patrick AFB are located. Sincerely,

J. D. HODGSON,

Secretary of Labor. Mr. THOMPSON. I have a somewhat similar letter from the Secretary. It is an incredible letter, and we are going to discuss it with the Labor Department representative who is testifying tomorrow.

He said that, as far back as 1967, no determination could be made with respect to prevailing wages because he didn't have the manpower.

Then he goes on to say that that position is in effect strengthened today by the so-called wage freeze.

Then in the next paragraph, he goes on to make a flat statement, after saying he has nothing to go on, he makes a flat statement that in the usual course of events, the wage levels in Brevard County are higher in Government activity than they are elsewhere, and Senator

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